Mr. TOWER. Yes, sir. If you are talking about the ground stations in the United States, I think the position of Western Union and ourselves is very close, and that we are both insisting upon the right of ownership of some portion of the ground station. We have participated with Mr. Gallagher and RCA, Mr. Hawkins, RCA communications, in the application for a joint ground station in the Southeast United States, so the U.S. carriers are pretty much together on the approach. Mr. HOLIFIELD. Are there different factors that would cause you not to feel the same about oversea ground stations? Mr. TOWER. With respect to oversea ground stations, Mr. Gallagher stated he had a couple of portables that he would have available, and, as I have indicated in my testimony, we have made proposals in both the Philippines and Thailand with respect to the installation not only of a permanent ground station but also of a temporary ground station. Mr. ROBACK. By one of your hardware companies. Mr. TOWER. Yes, sir; we do manufacture ground stations, we have many throughout the world. More recently in the Philippines I spoke about all the things that were going on there, actually it was, I guess, the end of February or the middle of February, when we joined with RCA Communications and Philippine Long Distance Telephone Co. in a joint proposal made to the Philippine Government for the installation and operation and maintenance of a permanent ground station which, if then installed, if it had been acted upon at that time, we would have been able to install a permanent ground station in the time frame needed by the DCA which would, in effect, have resulted in substantial economies to the DCA. Mr. HOLIFIELD. Do you feel as strongly as Mr. Gallagher does about the backup facilities at Brewster and Paumalu? Mr. Tower. Well, I think he has got a point. Certainly, it has been my understanding that, recent understanding that, the one in Hawaii was going to remain there anyhow as a backup. There may be something new on that. I am not too familiar with that. Mr. HOLIFIELD. But in any event you feel that there should be a backup to the large dish receivers. Mr. TowER. It certainly makes a lot of sense to have backup facilities. FIRST NOTICE OF 30-CIRCUIT PROCUREMENT Mr. ROBACK. Mr. Tower, when did you first become apprised of the 30-circuit procurement? Mr. TowER. It was some time in January. It was a meeting on January 18. Mr. Sampson, vice president of operations, Comsat, told Mr. McNitt, president of Worldcom, of the DCA inquiry of Comsat during the course of an informal discussion. This was the first word that Worldcom had. Mr. ROBACK. Was this the outcome of a board of directors meeting of Comsat or was this just a happenstance? Mr. TOWER. I would imagine it was a specific telephone call or a meeting between the two. Mr. ROBACK. Just a meeting between the two? Mr. TowER. Yes, not related to the board meeting. Mr. ROBACK. Then, you undertook to try to get more information about the procurement, did you? Mr. TOWER. Yes, we did. Mr. ROBACK. You wrote to DCA? Mr. ROBACK. Yes, we wrote to DCA and, I think, Mr. Roback, there are copies of pertinent correspondence in here. Mr. ROBACK. You wrote a letter, it appears, on the the 24th, from this correspondence, in which you tried to inquire, or you made an inquiry, as to the type of service being requested, and offering the services of your company, is that so? Mr. TOWER. Yes, sir. That was February 24. Mr. ROBACK. The letter to Admiral Boyle from Mr. Gancie. DIRECTION TO DCA TO NEGOTIATE WITH COMSAT Mr. ROBACK. And there is a reply which seems to be dated March 3, it is hard to make it out, to Mr. Gancie from Colonel Paschall. Mr. TOWER. Right. Mr. ROBACK. In which he states, Colonel Paschall states, that there ought to be some clarification because you seem to understand incorrectly that DCA has been directed by higher authority to go and negotiate with Comsat. Mr. TOWER. Correct. Mr. ROBACK. You did not know at that time that there was a directive by the Secretary of Defense-the Under Secretary of Defenseto proceed to negotiate with Comsat. Mr. TOWER. We did not know at that time, but we know now as a result of these hearings. Mr. ROBACK. Colonel Paschall's letter to you refers to "a possible misunderstanding which should be clarified." The letter goes on to say: Your statement that you now understand that DCA has inquired only of Comsat for channels because DCA has been so directed by higher authority does not accurately reflect the situation. And then he proposes to accurately reflect the situation, and I will read that brief paragraph and ask your understanding of it: The inquiry to Comsat concerning the provision of certain communications services is in accord with the current practice of obtaining international communications service from the carrier providing the transoceanic segment of that service; requiring that carrier to insure the technical sufficiency of the channel and to make necessary arrangements with the foreign correspondent.› There are significant operational and administrative advantages which accrue from this practice. Then he winds up: In summary, the DCA was not directed to secure satellite channels solely from Comsat but was merely following its long-standing practice with respect to international circuits. What does that mean to you? Mr. TOWER. Well, Mr. Roback, I must say that I was a bit confused with this paragraph because it sounded to me as though this statement is exactly the procedure which is followed in all inquiries with respect to overseas communications by the Mr. ROBACK. You asked him whether he was dealing only with Comsat. He said that you do not understand the situation, it should be clarified, and then he proceeds to tell you what? It does not really make any sense, does it?" Mr. TowER. It only says, it only states, the procedures which are normally followed with the regular carrier. Mr. ROBACK. If he wanted to clarify the situation, he should have said yes or no; isn't that so? Mr. HOLIFIELD. Your nod is not recorded on the record. Mr. TOWER. Yes, sir. Mr. ROBACK. This is not casting any aspersions on the colonel. But it sounds like a letter in which he preferred to defer the situation. He did not know until May 2 that, perhaps, his office was going to make this a competition or solicit competitive offers, and perhaps he did not want to be in the position of committing himself. Maybe he did not have enough information. In any case, it is what you might call a good example of equivocation. ITT ROLE IN OBTAINING COMPETITION What was the purpose of your corresponding with General O'Connell? Was it that you were trying to enlist some sympathetic voice for your bidding or being considered as a bidder? Mr. TowER. You are talking of the July 13 letter? Mr. ROBACK. Well, how many letters did you have to Mr. O'Connell? Mr. TOWER. The only one in this series.1 Mr. ROBACK. Let me ask you this: do I understand from the chronology which was presented in Mr. Westfall's letter to Mr. McCormack that you, that is ITT, persuaded Mr. O'Connell that there ought to be a competitive solicitation? Is that your understanding, that you persuaded General O'Connell ? Mr. TowER. I do not know about the persuasion. I know Mr. Gancie had had conversations with General O'Connell in this matter. Mr. ROBACK. Is it your understanding that General O'Connell was instrumental in getting DCA to make this a competitive solicitation? Mr. TOWER. I would expect that he had some voice in it; yes, sir. Mr. ROBACK. That is an appropriate interpretation from item 8 of your chronology in the letter of Mr. Westfall to Mr. McCormack. Mr. TowER. I think that is right, sir. Mr. ROBACK. What kind of competition were you asking for in this conversation? Mr. TowER. Well, what we were looking for was Mr. ROBACK. You were trying to Mr. TOWER. Normal consideration by DCA on a normal bid and inquiry basis for satellite channels in the Pacific. FCC JURISDICTION OVER COMSAT Mr. ROBACK. There was one point in the proceedings in which you entered a judicial action, a petition for a restraining order and an injunction, a temporary injunction, against Comsat. What was the 1 With reference to the July 13 letter, see the letter provided by Mr. O'Connell, p. 399 above. purpose of that? You make some points in your chronology that Comsat was trying to invade or escape FCC jurisdiction. Do you think that is a fair construction? Mr. TOWER. That was part of the, an essential part of the, filing made. Mr. ROBACK. How could Comsat avoid FCC jurisdiction? Mr. HARTMAN. By dealing directly with DCA, and denying that the Commission had any authority to control on a regulatory basis, but simply, this was simply, a question of the prerogative of the executive. Mr. ROBACK. When did Comsat ever deny FCC jurisdiction? Mr. HARTMAN. Well, they right now are contending in their petitions for reconsideration, as they did initially. Mr. ROBACK. They are only contending that, under the Satellite Act, the Government is an authorized user of their services. Mr. HARTMAN. They go a step further and they say the determination as to whether DCA can work directly with Comsat is purely an executive decision in which the FCC has no part. Mr. ROBACK. But if they have to provide the services, if they need an authorization to provide the services, if they need an authorization to get access to those operating service units of Intelsat, if they need authorization to construct a ground station, if they need authorization to do any of the other things that are concerned with regulation of facilities and provision of services under the Communications Act, they have never said that they are not, have they, that they are not subject to the jurisdiction of the FCC? So even if they went and made a contract with the DCA, and the Comptroller General said there was nothing in the procurement statute which would bar the DCA from making a contract, why would that be an evasion of the FCC jurisdiction? Mr. HARTMAN. Well, the posture of Comsat, as I understand it, is that they are entirely subject to FCC jurisdiction, except in one respect, and in that respect, which is dealing directly with a Government agency, they are not subject to the jurisdiction as to whether or not they can provide the service. The only element left to FCC regulatory authority is the question of the rate. Now, the court concept was that if the FCC could not control the providing of service by Comsat directly to the U.S. Government, then there was not appealable basis, if that were the decision, and that is why we went into the court. EXTENSION OF AUTHORIZED-USER DECISION Mr. ROBACK. Well, is it your idea, and do you believe, that the authorized-user decision is determinative of that question, or is that one for future judicial action? Mr. HARTMAN. Well, I think without any question, Mr. Roback, the Commission's decision, although we fully support the principle of it, leaves something to be desired. For example, RCA has pending a petition for reconsideration, which would, if adopted by the Commission, require Comsat, upon the notice of a specific requirement by an authorized user, to come to the Com mission and advise them of the requirement. The Commission then would determine whether or not it was a situation in which Comsat should deal directly with the Government or the large user. Mr. ROBACK. RCA wants an advance determination Mr. TOWER. Right. Mr. ROBACK (continuing). Before DCA gets into a contract situation, is that the substance of their petition for reconsideration? Mr. HARTMAN. Yes, sir; that is right. Mr. TOWER. That is right. Mr. ROBACK. They are not putting a petition for reconsideration on the same grounds as the Government? Mr. HARTMAN. Oh, no; not at all. They are supporting the substantial Mr. ROBACK. They want an advance determination so they won't go through the hassle of a contract without a real knowledge of what the ultimate decision would be by the FCC over rates and everything else that is involved; is that correct? Mr. HARTMAN. Correct, at least as I read their petition. I probably should not be interpreting for them. Mr. ROBACK. Are you standing behind the argument in your petition for a restraining order as to FCC jurisdiction? Mr. HARTMAN. Oh, yes. Mr. ROBACK. Do you still interpret the applicable statutes as requiring the FCC to approve any business, and to control any business that Comsat has with the Defense Department? Mr. HARTMAN. Yes, sir. Mr. ROBACK. This is a constructive interpretation, so to speak, of the situation. Mr. HARTMAN. Yes, sir. Mr. ROBACK. This is your interpretation of the matter. Mr. HARTMAN. That is correct. Mr. TOWER. That is right. Mr. ROBACK. Is there anything else, any other observations that you would want to make to the committee? Mr. TOWER. I think not, sir. I think I have said as much as I am prepared to today. Thank you very much again. Mr. HOLIFIELD. We appreciate your testimony, Mr. Tower, and we find it quite helpful. Mr. TOWER. Thank you very much, sir. (The following correspondence was submitted for the record :) INTERNATIONAL TELEPHONE & TELEGRAPH CORP., Gen. JAMES R. MCCORMACK, |